Written by Sumit Roy  |

September 14, 2012

Week In Review: Gold, Silver, Platinum Jump After Unprecedented Fed Move; NatGas Spikes 12%

Details

We examine the latest developments in commodity markets and the week's performance.

Commodities surged broadly after this week’s Fed announcement of QE3. Only corn ended the period in the red due to the latest supply and demand data from the USDA.

Stocks, as measured by the S&P 500, rose 2 percent to the highest levels since 2007. The stock index is now up almost 17 percent year-to-date.

Macroeconomic Highlights

The Federal Reserve unveiled what some characterized as a “monetary bazooka” in this week’s policy decision. The central bank said it would buy $40 billion worth of mortgage-backed securities per month, indefinitely. The purchases will begin today.

The Fed also extended its pledge to keep its benchmark overnight interest rate—the federal funds rate—near zero from late 2014 to mid-2015.

Importantly, the central bank promised to add to purchases if the labor market doesn't improve.

The open-ended nature of QE3 and the Fed's flexibility in terms of adding to purchases if growth doesn't improve is a particularly bullish combination for commodities. Total purchases could conceivably end up at over $1 trillion. On the other hand, it could be much less.

But in either event, the U.S. Central Bank has made it clear it will provide an extremely accommodative monetary backdrop as long as economic growth remains sluggish. Commodity bulls couldn't have asked for more.

Commodity Wrap